1E03 Chapter 15.docx

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Bridget O' Shaughnessy

15. Managing the Marketing Mix:  Product, Price, Place, and Promotion Product Development  Value: Good quality at fair price, when the benefit of a product exceed the cost of the product in the eyes of the consumer o The benefits they seek are fulfilled along with the service they receive o Firms must constantly monitor changing consumer wants and needs to adapt products to them Total Product Offer  Consists of everything that customers evaluate when buying something o Value enhancers along with the product o Ex. Restaurant food (Core Product) plus the excellent service=augmented product o Some are tangible (ex. packaging) and others intangible (ex. Extra services) Product Lines and the Product Mix  Product Line: group of products that are physically similar or are intended for a similar market o Ex. Household cleaners, shampoos (each one may have several brands)  Product Mix: combination of product lines offered by manufacturer o Ex. Manufacture sells various products  Companies must decide what mix is best, diversifying lessens the risk of focusing on only one target market Product Differentiation  The creation of real or perceived product differences o Actual differences are quite small, it is how the marketer plays with price, advertising, and packaging (value enhancers) to create a unique, attractive image Packaging Changes the Product  Companies have used packaging to change and improve their basic product  Can also make it attractive for retailers o RFID and UPC’s (Barcodes) help in organizing and finding products within stores Functions of Packaging 1. Attract buyer 2. Protect goods 3. Easy to open 4. Describe the information 5. Explain benefits 6. Describe important information 7. Some indication of the price, value, and uses Importance of Packaging  Strong promotional burden o Combination packs have various products from a company put into a bundle  This can be expensive but value enhancers must meet the needs of customers Branding and Brand Equity  Brand: is a name, symbol, or design that identifies the goods or services of one seller or a group of sellers and distinguishes them from the goods and services of competitors o Essentially what differentiates a product from another o Distinction makes them attractive as it assures  Product quality  Reduces search time  Add prestige effect to product o For sellers benefits include  Facilitate new product lines  Promotion  Set higher prices for new product o Trademark is a special kind of legal brand and if broken you can take legal action Generating Brand Equity and Loyalty  Brand Equity: value of brand name and associated symbols o Value of brand not known until it is sold to another company  You can boost short term sale by giving out coupons but the consumer commitment to brand names are eroded, especially in grocery stores  Brand Loyalty: degree to which consumers are satisfied, enjoy, and commit themselves to the product (future sales) o Value of brand can be calculated o Highlighting carbon footprint gains brand loyalty these days  Brand Awareness: how quickly or easily a brand name comes to mind o I say soft drink you say Coca Cola o Event sponsorship and pure repetition of the brand name can increase this for a product Brand Management (Product Manager in B2B)  Has direct responsibility for one brand or product line o All elements of marketing mix are incorporated in this throughout the life cycle of the product o This creates greater control over the product development o During fading sales, reinventing the product can re-ignite the business cycle  Also introduce new products to focus on other areas if you have to abandon previous products due to fading sale The Product Life Cycle  Four stages o Introduction, Growth, Maturity and Decline o This is a theoretical model, not all products follow this entire trend  Some go through the trend in months  Some say in maturity for years  Some never make it pass introduction Using the Product Life Cycle in Marketing  Different stages call for different strategies o Maturity stage is when the product tops sales growth while decreasing profits  Creating a new image of the product may balance this effect out Competitive Pricing  Most difficult to control in the four P’s because price is an important ingredient in consumer evaluations Pricing Objectives  Price it high and use the right promotion, you may be able to make it a valuable product to consumers o This creates a strong return on investments if costs need to be recuperated o Also better in the long run  Price it low and discourage competition and you may gain more market share o These products are called loss leaders because in the long run this would not work  But short term would allow you to penetrate the market  Achieve Larger market share (Lowering prices does this well)  Creating an image (pricing high does this well)  Further social objectives (price is set to make 5% of all earnings go to donations)  PRICES ARE USUALLY SET SOMEWHERE ABOVE THE COST Cost Based Pricing  Cost is the primary basis for which producers set price o Recuperate the cost and add a little margin for profit o But will the price be satisfactory for the market?  Because in the end, the market decides the price, not the producer Demand Based Pricing  Targeting costing: demand based that products are designed to not only meet consumer needs but as well create a profit margin o Estimate the cost the consumers are willing to pay and subtract the profit margin to come up with the price Competition Based Pricing  Based on what all other competitors are doing o Price depends on customer loyalty, perceived differences, and the competitive climate o Price Leadership: when one or a few firms set the pricing practices for other competitors in the industry Break Even Analysis  Used to determine the profitability of product as various levels of sales o The Break Even point represents where the revenue from sales meets expenses o Calculated by: Break Even Point= Total fixed cost (costs that always stay the same through time)/Price-Variable Costs (costs that differ at levels of production) New Product Price Strategies  Skimming Price Strategy: Price product high to recover for research cost and make as much profit as possible when there is little competition  Penetration Price Strategy: Lower prices will attract more buyers and discourage companies to compete due to less profit, enables firm to capture large market share quick
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